Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Hansard source

I have great pleasure in speaking to the motion to take note of the report titled Improving the superannuation savings of people under 40 by the House of Representatives Standing Committee on Economics, Finance and Public Administration. At the outset I congratulate the chairman, the member for Cook, the deputy chairman, the member for Rankin, and all members of the committee on their very hard and extensive work on what I thought was a pretty challenging inquiry. In addition, I congratulate all of the members of the secretariat, who, as we all know in this place, do the real grunt work. They not only sit through the hearings but have to read through every submission—probably more extensively than we do, if the truth be known. Also, they have to prepare the draft report and then the final report and, along the way, put up with the idiosyncrasies of each committee member. So I congratulate Mr Stephen Boyd, Mr Peter Keele, Ms Bev Forbes and their team.

Superannuation is an increasingly important issue for the Australian community and the Australian government. The most pressing issue in superannuation today is the question of adequacy of superannuation savings. Since the introduction of the superannuation guarantee, we have had an exponential growth in superannuation savings, but it is well known that, at a rate typically of nine per cent, someone starting work even at a young age is not likely to have retirement savings that are adequate enough at retirement age to make them entirely self-sufficient in retirement.

It is a very important challenge for us to ensure that that changes and that young people do recognise that, unless they go beyond what the superannuation guarantee delivers to them, they are going to be relying—at least in part—on a pension. Looking at the figures, I am sure that it would not give them the lifestyle they are looking for.

I must say that it was fairly bold of the committee to seek a reference that was restricted to the under-40s. I think it is fair to say that that is where the biggest challenges are. Indeed, from the very beginning of the inquiry, the terms of reference narrowed the opportunities the committee had to make substantial recommendations. That was borne out during the various discussions held by the committee. It seemed that every time someone had a good idea, there were another 10 reasons why we should not embrace that idea.

Going back to my thank yous, I acknowledge that I was not as active a participant in this inquiry as most other committee members were. That was simply because my shadow ministerial responsibilities did not allow me to attend all of the hearings or to read through all of the submissions. But I have very great confidence in the members who did sit on the committee. Like most House of Representatives committees—and indeed like most joint committees—the members worked in a very cooperative way. They put politics aside as they tried to work through these very difficult issues.

There are some good recommendations in the report. In particular, I think it is a very good idea to have a benchmark target for young people so that they have, in effect, put in front of their eyes very early in their working life exactly what they will need to gain retirement savings that are adequate to deliver the sort of lifestyle they require. Of course, that will be a general benchmark; it will not apply to everyone equally. It is also true that people can go and seek information from a financial adviser if they are so motivated; but the reality is that people at that age tend not to do that. It is probably not until they get past the age of 40—or at least until they start having children and start thinking about retirement and the need to cater for not only themselves but their children—that they really start to focus on that issue. I think that is a very good initiative.

I also think that encouraging people to enter into a voluntary scheme of co-contributions is a good idea. Of course, with all of the other pressing needs that arise at that younger age—the family mortgage, the school fees, even just feeding the children and all the things that seem to come at once in one decade—people are not likely to make the additional voluntary contributions unless they are prompted to do so. I think that giving people the opportunity from the very beginning of their working life, and getting them into the habit of making those contributions, is very helpful.

I welcome all the initiatives to attempt to align the system for employees with people who are in small business. It is well known in this place that we have a growing number of self-employed people in this country. As people start to utilise their skills in the area of self-employment, it is very important that we ensure that that part of the workforce is in the superannuation system as well.

Financial literacy is also important, and it goes to many of the things I have been talking about. It is worth noting that the committee struggled with the concept of the bottom threshold for SG contributions. We acknowledge that it seems unfair to those who are moving from job to job, but we realise that it could be a compliance cost nightmare for the small business people who have the paperwork to do and who have the obligation to make SG contributions. I thought it was interesting that, after a lot of debate, we decided in the end that it should probably stay where it is, but we will freeze it so that, over time in real terms, the figure will decrease and more people will come into the net of the SG system.

Superannuation savings in this country are now approaching $1 trillion. That is a significant achievement in itself but it is not enough. Whenever we talk about superannuation it is worth reflecting on what the former Hawke and Keating governments did in putting that system in place. It has been an enormous success. It is also interesting to note that this committee report was effectively gazumped by the government’s superannuation announcements on budget night. The committee, of course, looked at the tax on the way in, the tax along the way and the tax on the way out—at all of those things that might impact on adequacy. While there are some very important recommendations, the committee concluded that the system as it stands is pretty right and that it remains highly concessionary. There is a lot of complexity because of the grandfathering of various changes over the last decade or more.

As a result of our lack of big recommendations, as important as the recommendations are, I think it is fair to say that the committee concluded that the system, particularly as it applies to under-40s, is pretty right. You then have to ask yourself about the big superannuation changes announced by the government, and you can only conclude that there is some disparity between the thoughts of the committee and the thoughts of the government. I will leave it for others over the course of the next 12 months, as we debate those proposed changes, to conclude who was right and who was wrong.

One thing that the government, the committee and all members of this place would agree on is the question of inadequacy. It remains to be seen whether the government’s proposals are sufficiently targeted at that adequacy issue. While they are very strongly targeted at those who are exiting the system soon and very heavily targeted at reducing complexity, it remains to be seen whether they do what we hope would be done with respect to adequacy.

Various submissions were made to the committee about tax deductibility—for example, on undeducted contributions—and those points were well made. Indeed, I wanted the committee to consider whether there was some merit in allowing people to draw down on undeducted contributions—that is, the contributions of money on which they have already been taxed at the marginal rate. The view is that people voluntarily put money in there and do not enjoy the concessions given to other contributions under SG or otherwise and that they should be able to draw down on that money now. It is an open-ended question. It would not be expensive for the government; it would increase savings at younger ages and would address that adequacy question. The committee, in its wisdom, decided not to further pursue that issue, but I would like to put that out there as a possibility for future thinking. Again, I congratulate the committee and the committee secretariat on their very good work. (Time expired)

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